Profitability of Contrarian Strategies: Evidence from the Istanbul Stock Exchange

27 Pages Posted: 18 Jan 2008

See all articles by Recep Bildik

Recep Bildik

Borsa Istanbul (Istanbul Stock Exchange)

Guzhan Gulay

affiliation not provided to SSRN


This study examines the momentum and contrarian effects on stock returns in one of the leading emerging markets, which has a unique market structure, with record-high inflation, high volatility, high turnover, low correlation of returns with other exchanges and myopic investors: the Istanbul Stock Exchange (ISE). It also investigates the weak-form efficiency of the stock market by examining the profitability of a number of contrarian strategies based on past returns, size, price, book-to-market and earnings-to-price ratios of stocks in various lengths of formation and holding periods. Our findings show that a self-financing trading strategy, buying past loser stocks and selling past winner stocks generate significant abnormal returns (approximately 15% annually) in ISE. However, these large contrarian profits are for bearing the extra risk of loser stocks similar to the US results. We also find significant price, size, and B/M effects in stock returns. Finally, our results show the continuous profitability of contrarian strategies both in very short (starting from 1 month) and in long holding periods (up to 36 months), which appears to be related to country-specific factors.

Suggested Citation

Bildik, Recep and Gulay, Guzhan, Profitability of Contrarian Strategies: Evidence from the Istanbul Stock Exchange. International Review of Finance, Vol. 7, No. 1-2, pp. 61-87, March/June 2007, Available at SSRN: or

Recep Bildik (Contact Author)

Borsa Istanbul (Istanbul Stock Exchange) ( email )

Borsa Istanbul
Resitpasa, Emirgan
Istanbul, 34467
90-212-298 21 93 (Phone)
90-212-298 25 00 (Fax)

Guzhan Gulay

affiliation not provided to SSRN ( email )

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